Woolies growth back on track

Date: April 12 2013

Eli Greenblat

Despite relentless competition from a rejuvenated Coles and the arrival of steep discount players, Woolworths' flagship Australian food and liquor division has returned to its strong growth trajectory, to post its strongest quarterly sales in nearly two years.

The welcome rise in third-quarter sales was not mirrored across the retailer's portfolio, however, with its New Zealand supermarkets suffering from subdued market conditions and a static result from Big W as it cycled non-profitable clearance activity in the year before and saw further declines in the home entertainment category.

Woolworths chief executive Grant O'Brien said while the quarterly result was pleasing, there was still work to be done to ensure future growth.

''The momentum of the first half has continued into this quarter as a result of a sharpened focus on our core businesses and early results from work on our strategic priorities,'' Mr O'Brien said.

Woolworths' shares closed up 48¢, or 1.4 per cent, at $34.37.

The nation's biggest retailer saw total group sales for its stable of supermarkets, apparel, hardware, liquor and petrol operations rise 2.5 per cent to $14.423 billion.

Sales momentum from the beginning of 2013 looks to have swung into the third quarter, with Woolworths' sales from continuing operations - excluding its divestment of the struggling Dick Smith electronic chain - up 5.7 per cent.

The company's sales engine, Australian food and liquor through its supermarkets and big-box liquor outlets, put in a robust performance with sales up 5.6 per cent to $9.945 billion.

Comparable store sales for the division, which accounts for nearly 70 per cent of Woolworths' group sales, increased 3.8 per cent, or 3.1 per cent adjusted for Easter.

The strengthening of its food offering reflected promotional campaigns, continued price discounting and new targeted offers based on the rivers of customer data that flow into its headquarters.

''Our customers like the way we are using the insights we have on their needs through the investment we have made in customer engagement,'' Mr O'Brien said.

''We are finding customers feel empowered by the options we provide them.''

Mr O'Brien said while shoppers were buying more, retail trading conditions remained fragile.

''I would say continuing improvement in sales is some evidence of customers feeling more positive, but I think we have to be guarded in how we talk about that,'' he said.